First Abu Dhabi Bank Joins Middle East Lenders In Raising Provisions

Banks in the Gulf region are raising provisions to offset an expected increase in sour loans due to the twin shock of plunging oil prices and the coronavirus fallout

Abu Dhabi’s biggest lender joined its regional Gulf competitors in setting aside higher provisions to cover a spike in bad loans brought on by the coronavirus pandemic.

First Abu Dhabi Bank increased impairments to 1.06 billion dirhams ($289 million) from 467 million dirhams year ago. That resulted in second-quarter profit dropping 25%.

Banks in the Gulf region are raising provisions to offset an expected increase in sour loans due to the twin shock of plunging oil prices and the coronavirus fallout. First Abu Dhabi Bank follows Emirates NBD and Dubai Islamic Bank in increasing impairments charges.

The challenges are renewing the prospect for further consolidation among banks in the Middle East, with potential mergers being discussed in Saudi Arabia and Qatar. First Abu Dhabi Bank was created with the merger of two banks in 2016.

First Abu Dhabi Bank 2Q numbers

  • Profit 2.41 billion dirhams vs 3.22 billion
  • Net interest income 3.26 billion dirhams vs 3.3 billion
  • Non-interest income 1.53 billion dirhams vs 1.85 billion
  • Total operating income 4.8 billion dirhams vs 5.15 billion

Group CFO James Burdett said, “In the context of a challenging and uncertain environment, we continued to build our provision buffers, leading to a substantial increase in impairment charges, while our high-quality portfolio and conservative asset mix are key differentiators.”

  • Ongoing focus on cost discipline also led to significant savings, with various initiatives underway to create future efficiencies
  • “While economic activity is gradually resuming, we remain cautious as the shape and timing of the recovery remain uncertain”
For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
RECENT NEWS

Investcorp exits RESA Power In Sale To Kohlberg, Marking First Exit For North American PE Fund

Investcorp aims to replicate RESA’s success globally across its private equity business Read more

Gate Group Secures Dubai VARA License

Gate Group’s Dubai arm is accelerating the expansion of its local team as it prepares for its official launch Read more

UAE Announces New Tax Rule

The UAE has announced a new waiver for tax fines in the country Read more

First Abu Dhabi Bank Powers Ahead With Record Q1 Numbers

Total income up 11 per cent to $2.4bn as net profit rises 23% to $1.4bn and profit before tax reaches $1.67bn; Total as... Read more

UAE To Launch Dirham-backed Stablecoin

Dirham-backed stablecoin launched in the UAE will enable simple digital payments Read more